Real estate expert Pat Zaby blogs about one of the many reasons home ownership trumps renting. Enjoy his article.
http://blog.patzaby.com/post/2010/11/22/Youll-Be-Worth-More.aspx
Tuesday, November 30, 2010
Tuesday, November 9, 2010
The Responsible Choice Will Never Pull Us Down
The link at the bottom of this post is to an article on the front page of the Sunday "Money Wise" section of the Charlotte Observer. The main premise of the article is that for homeowners "underwater" on their mortgages, those who owe more than the house is worth, making the responsible choice to continue to pay their payments on time is more harmful to the economy than walking away from their home.
I disagree!
While it is true that the couple referenced in the article will be "left out" of the current refinance market, their current interest rate is likely well below rates at other times during the past 40 years. I talk to responsible people like this everyday. After their initial disappointment of being "left out," they continue about their business and choose to make the best of the situation. Sure, they may be more frugal but when their roof needs repaired or replaced they will call a local roofer. When they feel that their kitchen is outdated and that by remodeling it they will improve their quality of life and pride in their home, they will call a local remodeling company.
Rather than look for a government handout or choose to walk away from their contractual agreement with their bank, responsible citizens may choose an alternative way to capitalize on the interest rate market. Here are two suggestions.
1. Buy an investment property. Non-owner occupied mortgages require more down payment and carry slightly higher interest rates but have long been used as a part of successful wealth building strategies.
2. Buy a new primary residence and convert their existing home into a rental property.
With either option buyers can capitalize on the current interest rate environment and reduced housing prices. Such a strategy can deliver a long term profit as a renter helps pay down the principal loan balance and housing prices will eventually return appreciation.
The responsible choice is often not the easy choice but it is the right choice. And when people make responsible choices they pull us all up.
http://www.charlotteobserver.com/2010/11/06/1816037/underwater-and-pulling-us-down.html
I disagree!
While it is true that the couple referenced in the article will be "left out" of the current refinance market, their current interest rate is likely well below rates at other times during the past 40 years. I talk to responsible people like this everyday. After their initial disappointment of being "left out," they continue about their business and choose to make the best of the situation. Sure, they may be more frugal but when their roof needs repaired or replaced they will call a local roofer. When they feel that their kitchen is outdated and that by remodeling it they will improve their quality of life and pride in their home, they will call a local remodeling company.
Rather than look for a government handout or choose to walk away from their contractual agreement with their bank, responsible citizens may choose an alternative way to capitalize on the interest rate market. Here are two suggestions.
1. Buy an investment property. Non-owner occupied mortgages require more down payment and carry slightly higher interest rates but have long been used as a part of successful wealth building strategies.
2. Buy a new primary residence and convert their existing home into a rental property.
With either option buyers can capitalize on the current interest rate environment and reduced housing prices. Such a strategy can deliver a long term profit as a renter helps pay down the principal loan balance and housing prices will eventually return appreciation.
The responsible choice is often not the easy choice but it is the right choice. And when people make responsible choices they pull us all up.
http://www.charlotteobserver.com/2010/11/06/1816037/underwater-and-pulling-us-down.html
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